Uzbekistan central bank keeps main rate unchanged at 14%

The board of the central bank of Uzbekistan has made a decision to keep the main rate unchanged at 14% per annum. Speaking about reasons, the regulator said it aims to reduce the inflation rate and maintain a positive level of real interest rates in the economy.

The regulator added that it is going to take all necessary measures to achieve the interim target of inflation below 10% at the end of this year.

Inflation and inflation expectations 

The inflation rate in 2020 comprised 11.1%, down from 15.2% in 2019.

The annual rate of core inflation in December continued to form above the overall price growth, slightly accelerating to 11.7%, reflecting the trends of rising food prices and the relative stability of regulated prices.

Inflation expectations of the population and business entities have relatively soared under the influence of increased uncertainty.

Monetary conditions

Еhe economy maintained positive real interest rates in 2020. The weighted average interest rate of the interbank money market in December was 14.4% and was formed within the limits of the interest rate corridor with a positive spread to the main rate.

The difference between the average daily turnover of funds and their balance on correspondent accounts of banks (liquidity) decreased by 38% compared to 2019.

The total volume of deposits in the national currency increased by 25% (9.6 trillion UZS), deposits of individuals soared by 31.6% (4.1 trillion UZS).

By the end of 2020, the balance of loans in the economy surged by 34.3% to 280.4 trillion UZS. Despite certain difficulties in economic conditions and the temporary extension of loan repayment, commercial banks have allocated 127 trillion UZS in loans, which is close to the indicator of 2019.

The average weighted interest rates on loans in the national currency in December were at the level of 18.8%.

The demand for foreign currency during the fourth quarter was relatively high, mainly due to the manifestation of demand delayed due to quarantine measures and the recovery of economic activity.

2021 forecasts 

Real GDP growth in 2021 is projected at 4.5-5.5%.

Structural changes and economic reforms in the real sector of the economy aimed at developing competition, improving the investment climate and infrastructure are expected to be the main drivers of the economy in 2021 and the following years.

According to estimates, the volume of credit investments in the economy in 2021 will be proportional to the growth of nominal GDP-in the range of 16-20%.

Inflation is expected to decline further to 9-10% by the end of 2021.

The board of the central bank of Uzbekistan has made a decision to keep the main rate unchanged at 14% per annum. Speaking about reasons, the regulator said it aims to reduce the inflation rate and maintain a positive level of real interest rates in the economy.

The regulator added that it is going to take all necessary measures to achieve the interim target of inflation below 10% at the end of this year.

Inflation and inflation expectations 

The inflation rate in 2020 comprised 11.1%, down from 15.2% in 2019.

The annual rate of core inflation in December continued to form above the overall price growth, slightly accelerating to 11.7%, reflecting the trends of rising food prices and the relative stability of regulated prices.

Inflation expectations of the population and business entities have relatively soared under the influence of increased uncertainty.

Monetary conditions

Еhe economy maintained positive real interest rates in 2020. The weighted average interest rate of the interbank money market in December was 14.4% and was formed within the limits of the interest rate corridor with a positive spread to the main rate.

The difference between the average daily turnover of funds and their balance on correspondent accounts of banks (liquidity) decreased by 38% compared to 2019.

The total volume of deposits in the national currency increased by 25% (9.6 trillion UZS), deposits of individuals soared by 31.6% (4.1 trillion UZS).

By the end of 2020, the balance of loans in the economy surged by 34.3% to 280.4 trillion UZS. Despite certain difficulties in economic conditions and the temporary extension of loan repayment, commercial banks have allocated 127 trillion UZS in loans, which is close to the indicator of 2019.

The average weighted interest rates on loans in the national currency in December were at the level of 18.8%.

The demand for foreign currency during the fourth quarter was relatively high, mainly due to the manifestation of demand delayed due to quarantine measures and the recovery of economic activity.

2021 forecasts 

Real GDP growth in 2021 is projected at 4.5-5.5%.

Structural changes and economic reforms in the real sector of the economy aimed at developing competition, improving the investment climate and infrastructure are expected to be the main drivers of the economy in 2021 and the following years.

According to estimates, the volume of credit investments in the economy in 2021 will be proportional to the growth of nominal GDP-in the range of 16-20%.

Inflation is expected to decline further to 9-10% by the end of 2021.